The Federal Trade Commission recently announced agreements with two auto dealers and the former general manager of a third, promising not to enforce—or even help enforce—their court-ordered obligations to maintain fair lending programs and not engage in unlawful credit discrimination, according to WIRED. The Northern District of Illinois, which presided over one case, said it was never given the opportunity to evaluate one of the new agreements, and Arizona Attorney General Kris Mayes called the move "outrageous." The FTC is doing away with the obligations because the defendants did not explicitly instruct their salespeople to treat Black and Latino borrowers differently. Previously, the FTC accused all three of charging people of color more in discretionary markups and add-on fees on average compared to white borrowers.
Agreements Without Court Oversight
The agreements, which were voted on by the commission in early August but went into effect over half a year prior, in November, are highly unusual, according to WIRED. Though the FTC typically has to prioritize some enforcement efforts over others due to resource constraints, forgoing these particular obligations means the agency is effectively abandoning enforcement of court-ordered fair lending programs. The Northern District of Illinois noted it was never given the opportunity to evaluate one of the new agreements. Mayes, whose office was a coplaintiff in another of the affected cases, said in a statement:
"The FTC and the Attorney General’s Office partnered on this case to ensure Arizonans can purchase cars without being misled or charged more because of their ethnicity. I find it appalling that the FTC would backtrack on the settlement and treat its state partners this way, not to mention essentially greenlight discrimination against Arizonans."
The Cases Behind the Agreements
One case involved Passport, a car dealership chain. The FTC alleged that a financial institution had sent Passport multiple letters notifying it that there were disparities in the markup rates it charged Black borrowers. Attorneys for Passport declined to comment on the agreement. In a separate case, the FTC and Arizona previously accused Coulter Motor Company and Gregory DePaola, a former general manager at the Phoenix-area auto dealer, of charging Latino customers more in interest and for add-on products, in violation of the federal Equal Credit Opportunity Act, among other charges. DePaola, who did not respond to a request for comment, signed one of the new agreements. Coulter and an attorney that represented both Coulter and DePaola in the 2024 settlement did not respond to requests for comment.
| Defendant | Allegation | Status |
|---|---|---|
| Passport (auto dealership chain) | Charged Black borrowers higher discretionary markups despite lender warnings | Attorneys declined to comment on agreement |
| Coulter Motor Company | Charged Latino customers more in interest and add-on products, violating ECOA | No response to request for comment |
| Gregory DePaola (former general manager) | Same allegations as Coulter | Signed one of the new agreements |
From Disparate-Impact to Disparate-Treatment
The FTC said in a press release that its past accusations against the defendants were "based on statistical analyses designed to show disparate-impact liability" and that the agency was not going to enforce those types of claims anymore. Disparate-impact discrimination is when a seemingly neutral policy or practice causes disproportionate harm to a protected group, even if that was not the original intent. It stands in contrast to disparate-treatment discrimination, which involves policy intentionally meant to discriminate. Aaron Rieke, the chief legal engineer at a legal startup called Privlex and a former FTC attorney adviser, explained the challenge:
"It's actually a really hard theory where you have to identify a specific policy, prove that it caused a disparity, and then the hardest thing of all is you have to prove that that policy doesn't serve a legitimate purpose."
Automated Decision-Making Under the Spotlight
Logan Koepke, a senior project director at Upturn, a nonprofit that researches technology's impact on civil rights, said that disparate-impact analysis is more important than ever because AI and other automated decisionmaking systems, which can sometimes take unintended actions, are being used more often to make important decisions like loan eligibility.
Administrative Pressure
Last year, the Trump administration directed the FTC and other agencies to review all past orders and take "appropriate action" in an executive order titled "Restoring Equality of Opportunity and Meritocracy." The administration has said that disparate-impact liability "undermines our national values."
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